Common-size financial statements:
A) are a specialized application of ratio analysis.
B) allow us to make meaningful comparisons between the financial statements of two firms that are different in size.
C) are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues.
D) All of the above are true.

Question

Quizplus · Accepted Answer

Common-size financial statements are indeed a form of ratio analysis, allow for comparisons between companies of different sizes by standardizing figures as percentages, and involve expressing each item as a percentage of a base figure like total assets or revenues.

Common-Size Financial Statements